The Debt Ceiling Charade

The so-called debate over the debt ceiling is going nowhere because the elected officials involved have zero experience in problem solving at any level. The only reason this debt ceiling increase hasn’t been rubber stamped like the last 100 times is that the Republican House is attempting to use it as a bargaining chip. With the Democrats in control of the Senate and Obama in the White House they have very little leverage and seemingly no clue as to how to use what they have.

Part of the problem is that Washington politicians know virtually nothing about negotiating. The result of almost every impasse is a “Washington Compromise”, just one more oxymoron from our capital. As every married man knows, a real compromise requires a tradeoff, some sort of sacrifice. You want to play golf this Saturday? Fine, but you’ll be spending Sunday working on that “honey do” list. You gotta give a little to get a little.

In the Washington alternative universe both sides get everything they want. But the laws of mathematics are not so easily suspended. Who does the giving? The tax payer of course. It is because of this habitual way of doing things that the debt keeps mounting.

It is all made worse due to the static scoring that assumes higher tax rates produce higher revenue. History shows us otherwise. The lowering of tax rates under Coolidge, Kennedy, Reagan and Bush II all were followed by increased revenue. Revenues fall during recessions-so let’s stop having them.

The GOP is trying to appear tough right now because they know this is why they won so big in the 2010 mid-terms. They have a mandate to cut spending without raising tax rates. Obama and the Democrats received the same message. Their solution? Stop passing budgets and try to stall until after the 2012 elections.

What should the Republican Party do?

First, get its act together. They are rudderless. There should be a clear plan with a chosen leader to promote it. Plan it before you publicize it. Instead, on the night we pass the “Cut, Cap and Balance” the “Gang of Six” announces a conflicting plan. I am a fan of Tom Coburn. He is one of the few decent people in politics-but he should have his head examined. Why would anyone join a “gang” that included Dick Durbin?

They need to make this a 2012 issue. It goes like this:

We have presented a plan for moving forward. In acknowledgement that the economy is still showing signs of weakness, particularly in the employment sector, we refuse to consider a tax hike. Since government spending requires diverting money from the private sector and prevents growth we are proposing serious spending cuts-not just lower levels of increase. By necessity this includes serious entitlement reform.

If the Democrats in the Senate refuse to work with us-or if the President vetoes this common sense plan-we will have no choice but to pass a series of small bumps in the debt ceiling to prevent a shutdown of government. The American people have made it clear that the growth of government must stop. We agree and we’re willing to take that fight to the polls in 2012.

Pat Duggan

Debate the Bigger Issue

Instead of playing a game of political chicken with Obama, the Republican leadership should grab the high ground and focus everyone’s attention on the big picture. Everyone knows the debt ceiling must be raised. The question is not whether it will peak at 15 or 16 trillion dollars-the cold reality is that it will be a much higher number. The GOP should not get trapped into negotiating around such a puny issue. They need to move the focus on the bigger, more important concerns. The health of the economy and the debt rating hinge on Washington’s ability to change the trajectory of government spending and the debt it generates. Under Obama, spending as a share of GDP has jumped 25% while revenues have dropped, as they always do, due to the deep recession. Current debt is virtually irrelevant when compared to the unfunded entitlement liabilities that exceed $100 TRILLION.

The only way to solve this problem, which was decades in the making, is with a long-term plan that will transcend the 2 year election cycle. The GOP needs to reject the static scoring that puts a price tag on lower tax rates. The Laffer curve demonstrates that the presumed correlations do not exist. Alan Reynolds recently authored a piece in the Wall Street Journal accompanied by a chart showing income tax revenue as a share of GDP as the top marginal rate was lowered from 91% to 28%. Revenues rose as a raw number and a percentage. (More on that here: LINK)

The silver lining in the current economic cloud is that the Democrats with their super majorities were able to give their economic theories a thorough test. The failure is also thorough and evident. The so-called “stimulus” was neither targeted nor temporary. The Democrats are trying to use it as a new baseline for budgeting. The crown for the party of big spending is properly placed once again. The GOP needs to claim victory and move on. The 2010 mid-term elections are their mandate.

This is our moment. We must seize it. Promises have been made for decades that can never be kept. The age of unfunded liabilities is over. True entitlement reform must include a transition to private accounts so that congress can never again spend what should have been in the mythical trust fund. Our health care is our responsibility. It is not a right-it is a basic necessity, just like food and housing-other areas where government meddling wreaks havoc. Insurance is a risk management tool that adds a layer of bureaucracy and the associated costs. It should be used sparingly, and will be, once it is untangled from the insane tax code.

A vibrant, growing economy can eventually dwarf the debt figures and then we can pay it off entirely. A rational energy policy focused on domestic drilling and proven technologies must replace the “green” fantasy. Real jobs will produce real revenue and help slay the inflation dragon that has already brought us $4 gas. Gains in national security are achieved as well. This message, this vision, can clarify the ongoing debate and serve as a national platform for the 2012 elections.

Pat Duggan

Reality Check For The Left

If we don’t force our elected representatives to cut spending they will be forced to tax YOU, regardless of your income, at a painfully high rate. The liberals have been lying about taxes ever since they first passed the initial income tax on “only the very wealthy” and only at small levels. They said they would never tax YOU-but they are now, aren’t they? They feed the beast of government and then when we try to cut some programs they scream bloody murder. Never forget that in the recent budget “negotiations” their proposal was to cut zero from our bloated federal budget. Nothing was on the table.

At some point tax revenue and spending levels must match. Borrowing only delays the inevitable but that is the preferred method for our gutless politicians. As anyone who has ever financed anything knows, it just costs more in the long run. Imagine a world in which everything that Congress authorized had to be paid for immediately. Imagine what it would be necessary if they were not allowed to create an unfunded liability. What if there really was a Social Security trust fund? A “lock box”? Washington pols would be faced with some serious decisions. They would have to raise taxes on everyone to levels that would end their political careers, or they would immediately have to trim the fat from the budget. Suddenly there would be no funds available for the Rock and Roll Museum or the “Bridge to Nowhere”. We wouldn’t have hundreds of federal agencies doing virtually the same thing. The Department of Redundancy Department would finally be shut down.

Today’s Wall Street Journal has the hard numbers here. It is eye opening.

LINK

Pat Duggan

Published in: on April 18, 2011 at 8:31 am  Leave a Comment  
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